Question

Question 4: Cash Flow Statement (7 marks) The Statement of Cash Flows for Sasha Ltd for year ended 30 June 2020 has been provided below: Sasha Ltd Statement of Cash Flows for the year ended 30 June 2020 $ $ 14,500 126,000 (16,500) (51,000) 73,000 Cash flows from operating activities Interest payments Receipts from customers Depreciation expense Payments to employees Net cash provided by operating activities Cash flows from investing activities Payment of dividends to shareholders Proceeds from issue of shares Proceeds from borrowings Acquisition of property, plant and equipment Profit on sale of vehicles Net cash provided in investing activities Cash flows from financing activities Proceeds received from sale of equipment Dividends received Payments to suppliers Income tax paid Net cash provided by financing activities Net increase in cash for the year Cash balance as at the 1 July 2019 Cash balance as at the 30 June 2020 (5,000) 120,000 168,500 150,000 11,600 445,100 42,000 10,000 (35,080) 25,000 41,920 560,020 (6,600) 553,420 Required a) Prepare a correct Cash Flow Statement for the year ended 30 June 2020. (5 marks) b) Analyse the completed cash flow and advise the business on its use of operating, investing and financing cash flows. In your answer you must refer to the phase/stage of operation. (2 marks)

Answer 1

126,000 cash flow from operating Activities Receipt from Customers Payments to employees (51,000) Payments to suppliers (35,080 Income Tax paid (25,000) Cash flow from operating 14,920 activities Cash flow from Investing activities Acquisition of property, plant and equipment Proceeds from sale of equipment 42,000 (150,000) 10,000 sividends received 14,500) Cash flow from investing (98,000) activities Cash flows from financing activities Interest payments layment of dividendo (5.000) Proceeds from issue of shares 120,000 Proceeds from borrowings 168,500 Cash flow from financing R69,000 activities

Cash flow from operating activities 14,920

Cash flow from investing activities (98,000)

Cash flow from financing activities 269,000

Net increase in cash for the year 185,920

Add: Opening balance of cash   (6,600)

Closing Balance of cash 179,320

Note:

Depreciation is a non cash item hence not included in cash flow statement.

Profit on sale of asset does not come in cash flow statement, rather proceeds from sale of assets come.

b) Cash flow from operating activities is positive indicating a good sign for the business from its operations.

Cash flow from investing activities is negative indicating that company is increasing its investments and hence shows the growth prospects.

Cash flow from financing activities is positive , indicating company is getting financed regualrly through issue of shares indicating a good sign.

Overall, company is doing good as its cash flow from both operating activities and financing activities are positive and it is investing which is shown by negative balance of cash flow from investing activities. It is having growth prospects as it is increasing its finance and also investing in new assets.